This year marked the 10th anniversary of the Casino Marketing Conference sponsored by BNP Media and Raving Consulting in Las Vegas. Attendance was essentially flat (or even a little down) compared to the prior year, thus reflecting the industry’s financial performance.

The Romero Awards, named after John Romero, honor the best marketing programs in a number of categories. Each year, I’m captivated by the creativity of the industry’s marketing professionals, and how that creativity results in demonstrated financial success. The industry remains dedicated to concocting and executing imaginative ways to encourage you to come and play…to be entertained.

Yet, despite the constant innovations dreamt up and executed, the industry remains moribund. During the economic free-fall, the industry seemed convinced that following the catastrophic reduction in profits, the sun would shine again. Some jurisdictions have experienced growth, no doubt. However, the pie is barely expanding in the aggregate, and if we exclude the top 1% based on value, the pie may still be shrinking in real terms. Four trends discussed during the conference will make the land based casino’s future even more challenging.

  1. The first is the need for state and local governments to grow their revenues. The old game where governments restricted supply that ensured casino profits and in return generated attractive tax revenues has faded. Now, jurisdictions issue more licenses and in some cases raise taxes to maximize revenues. This increases the supply of land based gaming at a time when demand has remained flat and drives intense competition for share. For example, this trend has decimated Atlantic City. I asked Randy Fine, CEO of FinePoint Group, whether any casino (excepting his client) in Atlantic City could become a success. Short answer: no. Short reason: competition and geographic disadvantage. By using payments data in our CSI business intelligence tool, we’ve seen the broad trends – falling revenue per casino, as well as the relative success of various casinos in managing their share position as new competition enters. Some get shellacked, but those who managed market share and player wallet share well see much better overall results.
  2. Secondly, lotteries appear poised to emerge as serious competition that could whack an unsuspecting industry with a two by four. State and local governments, again driven by the need for revenues, have the potential to grow their gaming wallet share at land based casinos’ expense. The lotteries could choose to aggressively pursue online gaming in ways the land based casinos appear oblivious to, based on the responses I heard at the conference. They argue the lotteries’ patrons are not the same patrons as the casinos’. Even if they’re right today, the lotteries possess the ability to change that in an instant. In a future article, I’ll expand on this topic. I’ll finish with a (leading) question: what drove Scientific Games to buy WMS? Was it that Scientific Games was dying to enter the moribund, hyper-competitive business of selling slot machines to a stagnant growth industry? …or was it as part of a long term strategy to garner content and know-how to capture casino’s revenues in an online push?
  3. The third trend relates to demographics and preferences. Casino gamers are aging, and young people have not shown enough interest in casino gaming to replace the core of casinos’ loyalty clubs which are literally dying off. Instead, they game on Facebook, on their mobile devices or via consoles and the industry has lost and entire generation of customers it may have trouble recovering. John Acres, perhaps the industry’s most creative force for decades, is focused on addressing this. His emotional and challenging speech resonated with all at the conference, but we’ve yet to see whether he’s found one or more silver bullets.
  4. The fourth undeniable trend is for online gaming to capture more wallet. IGT’s DoubleDown online social gaming product doubled its revenues in the most recent quarter. For now, it appears they’re ‘helping’ land based casinos. “If you can’t beat ‘em, join ‘em” appears to be the mantra of their casino clients. These casinos are trying to do all they can to learn by doing and figure out how they can react when the legal/regulatory/banking hurdles to online gaming are finally resolved. Social gaming panelists claimed that they can turn on a casino’s website to accept social gaming deposits in a single afternoon and at virtually no cost. They also claim that 70% of online gamers go to land based casinos. It took years for nearly all of those casinos to obtain a license and build a casino often at the costs of (sometimes) billions of dollars before a casino could open. It used to be that ‘bigger/more expensive was better’. CityCenter, Cosmopolitan, and Revel spent a combined ~$15 billion, and in the aggregate, they’ve lost billions since opening. The mega-project’s moment has passed and future investments should focus on low capital costs and high share of attractive gamers in underserved markets. Still, the question remains — will the emergence of social gaming help land based casinos retain their current clients and develop the next generation of gamers or do these strategies simply pave the way for clients to desert the land based casinos for emerging on-line options? Now there’s a bet that is worth considering closely.